Crowdfunding logistics
October 7, 2017 12:09 PM   Subscribe

Goal: crowdfunding for a friend's upcoming $20,000 medical expense. Complication: friend has an impulse-spending problem. They have given me permission to organize the fundraiser, and asked me to hold the money for them and pay money out as needed, which I am happy to do. How do I do this in a good, responsible, above-board way?

My understanding is that direct payments for someone's medical expenses are exempt from the gift tax — meaning that it will be safe from a tax point of view for me to hold the money and make these payments on my friend's behalf. My plan is to open a separate account for the money to keep it away from my own personal savings, and to keep notes on what comes from where.

We'll be fundraising through YouCaring, and also approaching IRL friends and family for donations.

Everyone involved in organizing this fundraiser trusts and cares for each other, and we do not feel any need to protect ourselves from each other. But we do want to make sure we're doing the right thing, being accountable, and taking the responsibility seriously.

What am I not thinking of? Is this a big enough deal that I should be hiring an accountant or a lawyer for advice on the plan? Are there other precautions I should be taking? Other responsibilities of this role that I'm not aware of?
posted by nebulawindphone to Work & Money (3 answers total)
It sounds like your friend wants to establish a trust and make you its trustee. Personally I would want to use a lawyer for all of this, but maybe those search terms will help you find DIY advice you're comfortable following.
posted by telegraph at 12:25 PM on October 7 [1 favorite]

I'm neither a lawyer not an accountant but it look like this is pretty straight-forward. I am assuming US law.

People are going to be giving the money to you personally and you are agreeing (in a nonbinding way) that you will use it to fund your friend's medical expenses. (I don't see any need for all the expense and overhead of a trust if donors are Ok with just trusting you to spend the money as intended.)

The gifts are personal (and not tax deductible) The person who receives a gift doesn't have to pay taxes on it. The person giving the gift to you doesn't have to worry about gift tax as long as it is under the annual limit. The money that you are giving your friend by paying his bills doesn't cause you any gift tax problems since it is being used for medical expenses.

So, my thoughts (as a complete stranger and non-expert) are
- Read the small print on the YouCaring site to make sure that aren't any limits or surprises. It looks YouCaring doesn't really care about what you do with the money - they just make money from the processing fees but you need to double check that.
- Research (i.e. ask an accountant) if you need to pay the hospital/doctor directly to qualify for the medical exemption for gift taxes and how this interacts with your friend's ability to take a tax deduction for medical expenses
- Be very clear and transparent with donors - the biggest risk here is that someone gets upset and tries to cause problems. Describe clearly where the money is going to go and how it will be spent including what happens if more is raised than it needed. Keep clear records of what came in and went out (having a separate account makes this very easy) Let donors know afterwards how it all worked out.
- Make sure your friend does not list you as the "responsible party" on his hospital/medical paperwork - that may only come up in elder care but it was an issue for us to make sure we could help our elderly relatives without being on the hook for their care.
posted by metahawk at 2:43 PM on October 7 [5 favorites]

Yeah, we are definitely not establishing a trust here.
posted by nebulawindphone at 5:48 PM on October 7

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